During his campaign, President-Elect Donald Trump proposed to raise tariffs to 60% for all goods imported from China and 20% for those brought in from the rest of the world. Mexico and copyright, the US’s top trading partners, will be facing a 5% additional tariff due to their failure to reduce irregular border crossings and drug trafficking. He also pledged to impose an additional 10% tariff on China due to the influx of Chinese drugs in the US.
Trump is widely recognized for imposing tariffs on imports from various countries as part of his America First policy. Tariffs provide a significant revenue source for the federal government, helping offset the decline in domestic tax revenues caused by tax cuts, as seen during his first term, wherein tariff revenues doubled to $74 billion between 2015 and 2020. The Tax Foundation estimates that a universal 10% tax will produce $2 trillion in federal government income between 2025 and 2023, while a 20% tariff will raise revenue by $3.3 trillion.
Tariffs aim to boost domestic manufacturing by making imports more expensive. This incentivizes businesses to shift supply chains and production facilities back to the US, potentially creating jobs and revitalizing the manufacturing sector. Additionally, tariffs seek to reduce the US trade deficit by discouraging imports and strengthening the US dollar.
The Impact of Tariffs
Despite these goals, many experts argue that the long-term effects of tariffs will be more harmful than beneficial. These tariffs will reduce GDP by 0.4 percent and employment by 344,900 jobs in the long run, as per estimates by the Tax Foundation. Although it is claimed that foreign countries pay the tariffs, the reality is that US companies importing goods bear the cost, which is then passed on to American consumers, contributing to inflationary pressure. The Peterson Institute for International Economics estimates that the proposed tariffs will cost the typical US household more than $2,600 annually.
In 2023, Mexico and copyright contributed approximately 16% and 14% to total U.S. imports, respectively, as per the UN COMTRADE international trade database. The additional tariffs will likely increase grocery and gasoline prices. Both copyright and Mexico supply cement, metals, and machinery-related products to the US, which can raise construction costs. The Tax Foundation estimates that taxes on US households will rise by $1,253 on average in 2025 under a 10% universal tariff and an average of $2,045 under a 20% universal tariff.
Read More: Trump’s Tariff Threat